Frack Sand Demand Leads to Booming Mines

Frack sand, used in hydraulic fracturing operations, is in high demand as shale gas and oil plays grow in the U.S. The Eagle Ford is one of the major hot spots for sand demand. A lot of the sand used in the South Texas play is brought in from Central Texas where sand is easy to mine and has favorable characteristics.  That means it's uniform, relatively smooth, and round. Good sand can cost upwards of $100 per ton and an operation in the Eagle Ford can used more than 2,000 tons in one well. If you're counting, that's $200,000 for sand to complete one well. It's truly a boom and as many as 1,000 people are employed in McCulloch County in the sand mines alone. That doesn't include truckers and other support needed to keep the mines running.  For reference, that is a couple hundred miles away from the closest Eagle Ford production. The Eagle Ford job machine continues on........ 

Ron Jordan picked up a handful of damp sand as it cascaded off a broad conveyor belt, eventually bound for trucks or railcars that will take it to eager buyers in South Texas and around the country.

“This is the good stuff,” Jordan said as he fingered the golden-colored sand. “This is what everybody wants.” The sand felt more grainy than the sand on your average Texas beach.

It was beach sand, though, that two days earlier had been mined from sandstone formed from an ancient sea that lapped what was shoreline here more than 500 million years ago. Sand mining is booming in Central Texas, as drilling companies are demanding tons of it. Sand aids in getting the best production from wells drilled in the Eagle Ford shale of South Texas and other tight rock formations.

Read the full news release at fuelfix.com

Lawsuits Over Mineral Rights on the Rise

Lawsuits over the nature of mineral leasing and the high stakes game of who owns and who leased first is a multi-million dollar issue in South Texas. Everyone sells land and leases minerals happily until acreage prices skyrocket. That's when the lawyers come out. That's when people realize they might have missed something very big. The gravy train of $10,000+ per acre lease bonuses and long lived royalties might have passed right by. Often times, real estate trades for fractions of the dollar before oil or gas is discovered. In a 1-2 year time period in Northern Louisiana, acreage prices in the Haynesville Shale increased from less than $3,000 an acre (that was good) to sell land and mineral rights to simply leasing minerals for as much as $20,000 per acre. Prices have come down, but the boom is much like what we'experiencing in the Eagle Ford.

The dollars involved also increase the likelihood of fraud. There will no doubt be bad apples, but companies do their due diligence on title and many of these issues are resolved before leasing. If you are leasing, always do research to make sure you're working with a reputable party.

A tangle of lawsuits has been filed over the disputed ownership of valuable mineral-rights leases in the booming Eagle Ford Shale in South Texas, including allegations that the Fort Worth office of JPMorgan Chase & Co. wrongfully leased lands in Karnes and DeWitt counties.

In the DeWitt case, Orca Assets of Corpus Christi says it paid $3.2 million for a lease that the bank, acting for Fort Worth-based Red Crest Trust, had already sold to a rival drilling company.

Orca is on the other side of litigation in Karnes County, where it is a co-defendant with Chase and the trust.

Not too long ago, very few would care about those assets. But hydraulic fracturing technology has made Eagle Ford a hot drilling area. The San Antonio Express-News reported that mineral leases that fetched just a couple of hundred dollars less than a decade ago are now commanding $10,000 and more.

Kenedy TX Housing Developer Adding Homes and Apartments

A Kenedy, TX, Eagle Ford Shale housing development is on its way. A San Antonio based company is has acquired 166 acres where the new "Kenedy Station" residential and commercial development will be started later in 2011. The master plan for the community will add a combination of 500 homes and apartments to the area. Those homes should be in high demand as most oilfield workers are forced to commute from other towns or have to stay in hotels for months at a time. A 10-plex apartment complex and 5-6 homes will be constructed later in the year. The first phase of development will include up to 17 homes. Hotels and RV parks continue to boom and expectations are for more permanent housing to be constructed as oilfield workers plant roots in what is expected to be a multi-decade development.

A San Antonio-area developer has purchased 166 acres in Kenedy for a project to help fill the desperate need for housing for oil field workers in the Eagle Ford shale.

Kenedy Station, a residential and commercial development, should break ground late this year. Although it will be built in phases, plans ultimately call for 260 home sites and 240 apartment units.

Kevin Brown, Abrego Development Co. president, said he was approached more than three years ago by the Karnes County Economic and Community Development Corp. about the need for more housing in the area. And that was before the oil boom.

The project is part of a Tax Increment Reinvestment Zone. Developers pay for public infrastructure up front but are paid back over time as property values increase.

Read the full news article at chron.com

Crimson Exploration - U.S. Energy Eagle Ford Drilling Successes

Crimson Exploration announced drilling success in both Karnes and Zavala Counties. The company's Karnes County well came online at more than 1,000 barrels of oil equivalent per day and was completed through a 4,200 ft horizontal lateral with 15 frac stages. Future well test that are planned will have longer laterals and additional frack stages. The company also completed a well in Zavala County where U.S. Energy Corporation is a partner. The well initially had issues with too much water production, but the companies were able to plug the water producing portion of the well and bring it back to production at more than 400 barrels of oil equivalent per day. That's a win for a well that could have been written off for too much water production.

Crimson Exploration

In Karnes County, TX, the Littlepage McBride #2H (53.0% WI), targeting the Eagle Ford Shale formation, commenced production at a gross rate of 1,030 Boepd (952 Bopd and 465 Mcfpd) on a 15/64th choke and 2,700 psi of flowing tubing pressure. The well was drilled to a total measured depth of 16,174 feet, including a 4,200 foot lateral, with 15 stages of frac. The Littlepage McBride #2H is located approximately 0.6 miles east of the Littlepage McBride #1H (53.0% WI) which is currently producing 415 Boepd and has produced a cumulative 78,000 Boe since the commencement of production in early April. The Littlepage McBride #4H (53.0% WI) well recently reached a total measured depth of 16,572 feet, including a 5,600 foot lateral. Also, drilling operations are currently underway on the Littlepage McBride #3H (53.0% WI) which is expected to reach a total measured depth of 16,610 feet, including a 5,800 foot lateral, by early October. Crimson anticipates completion operations to begin on both wells by the middle of the third quarter, and will have a continuous drilling program in this area through at least the first quarter of 2012.

Crimson recently completed the KM Ranch #1H well (50% WI), the first well in its Zavala County Eagle Ford project area. The well was drilled to a total measured depth of 12,627 feet, including a 5,800 foot lateral. The well was completed with 20 stages of frac in late June and flow back operations commenced. Initial flow back data indicated that the well was in communication with an extraneous source of water not coming from the Eagle Ford formation. Diagnostic production logs identified the source of the water entering the wellbore near the toe of the well and in late August the water source was mechanically isolated with the setting of a plug in the casing between frac stages 9 and 10. The well was then placed back on production at a gross rate of 418 Boepd (331 Bopd and 524 Mcfpd) on a 20/64" choke and 397 psi of flowing casing pressure. The extraneous source of water was effectively shut off and for the first seven days of production following the remedial work, the well has averaged 380 Boepd. The initial production rates from the eleven contributing frac stages are the equivalent of a 3,200 foot lateral.

US Energy Corporation

In February and June of 2011, we entered into two separate participation agreements with Crimson Exploration Inc. to acquire a 30% working interest in two oil prospects and associated leases located in Zavala and Dimmit Counties in Southern Texas. Both leaseholds are Eagle Ford Shale oil window prospects.

The first well on the Leona River prospect, the KM Ranch#1H (30% WI), was completed with 20 frac stages in late June and flow back operations have commenced. Results are reported above in Crimson's quote. Crimson and the Company are very encouraged by the latest results showing excellent oil flow potential from essentially half the lateral, which is indicative of good reservoir parameters along with the relatively high gas rates seen in the flow back period.

Read the full press release at crimsonexploration.com and usnrg.com

Eagle Ford Shale Play Not Closely Followed

The Eagle Ford is getting a little love, but the Bakken is the talk of the oil world. That might change if current projections come to fruition.  We might have a resource race on our hands that pits American production vs. American production. That's a nice problem when you consider we've haven't been able to have that conversation for decades. We're reliant on imports for a majority of our oil consumption, but the Eagle Ford and Bakken are beginning to put a dent in those numbers.........Maybe, we'll get Jim Cramer visit us in South Texas.

A few weeks back CNBC sent anchor and Mad Money host Jim Cramer up to the Bakken shale to get an on the ground view of the amazing changes taking place in the area. North Dakota is booming with an overwhelming demand for employees. The companies leading the drilling efforts such as Continental Resources (CLR) and Brigham Exploration (BEXP) have benefited handsomely from the massive growth in that area.

Though known by many industry experts and investors, another area exists in southern Texas that might match or exceed the oil produced from the Bakken. That area is called the Eagle Ford Shale.

With an estimated 25B boe, Eagle Ford has enormous untapped potential. Companies have in earnest only been drilling in the area for the last couple of years. Petrohawk (HK) was a leader in the area and BHP BIlliton (BHP) recently bought them out.

Read the full news article at seekingalpha.com